SMU Law Review
Volume 61
Issue 3
Annual Survey of Texas Law
Article 3
2008
Antitrust and Consumer Protection
A. Michael Ferrill
Leslie Sara Hyman
William Hulse
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Recommended Citation
A. Michael Ferrill* Leslie Sara Hyman** William "Butch" Hulse***
TABLE OF CONTENTS
I. INTRODUCTION ... 532
II. ANTITRUST STATUTES ... 533
III. DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT ... 550
A. STANDING AND CONSUMER STATUS ... 550
B. DECEPTIVE PRACTICES ... 551
1. Laundry List Claims ... 551
2. Section 17.50-Breach of Warranty ... 552
C. DETERMINING THE MEASURE OF DAMAGES ... 553
1. Damages for Mental Anguish ... 553
2. R estitution ... 554
D. EXEMPTIONS, DEFENSES, AND LIMITATIONS ON R ECOVERY ... 555
1. Exemptions Within the DTPA ... 555
2. Preemption and Exemption From the D TPA ... 556
a. Texas Medical Liability and Insurance Improvement Act ... 556
b. Exhaustion of Administrative Remedies ... 557
3. Necessity of Proving Causation ... 558
4. Necessity of Proving Reliance ... 559
5. "A s Is" Clauses ... 561
6. A "Mere" Breach of Contract is Not Actionable Under the D TPA ... 563
IV. CONCLU SION ... 563
* B.B.A., St. Mary's University; J.D., Baylor University; Shareholder, Cox Smith
Matthews Incorporated, San Antonio, Texas.
** B.A., Brandeis University; J.D., Hastings College of the Law; Shareholder, Cox
Smith Matthews Incorporated, San Antonio, Texas.
*** B.A., Angelo State University; J.D., Baylor University; Associate General
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I. INTRODUCTION
ALTHOUGH
the purposes served by the antitrust laws and the Texas Deceptive Trade Practices-Consumer Protection Act I("DTPA") 1 are complementary, they are not identical. The ob-jective underlying the antitrust laws is protecting competition.2 In con-trast, the DTPA is intended "to protect consumers against false, misleading and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection."'3The shared concern, nevertheless, of both antitrust law and the DTPA, is the consumer. The United States Supreme Court has described the antitrust laws as a "consumer welfare prescription,"'4 and the lower courts have echoed this principle, recognizing that "[u]ltimately, the consumer is the beneficiary."5 An additional connection is found in the DTPA's gen-esis. The statute is modeled on the Federal Trade Commission Act ("FTC Act"); indeed, the DTPA provides that "[i]t is the intent of the legislature that in construing Subsection (a) of this section . . .the courts to the extent possible will be guided by ... the interpretations given by the Federal Trade Commission and federal courts to Section 5(a)(1)of the Federal Trade Commission Act."'6
Although both the antitrust laws and the DTPA ultimately are con-cerned with consumer welfare, they focus on different aspects of the com-petitive process. While antitrust primarily is concerned with the misuse of market power to harm consumers, the DTPA primarily focuses on con-sumer harm through deception. Further, although concon-sumer protection statutes like the DTPA are frequently referred to as "little FTC Acts,"'7 the Texas legislature did not include the "unfair methods of competition" prohibition contained in section 5 of the FTC Act, rather adopted only the "deceptive acts or practices" prong of that statute.8
This survey covers significant developments under the federal and Texas antitrust laws and the Texas DTPA from November 1, 2006 through October 31, 2007.
1. TEX. Bus. & COM. CODE ANN. §§ 17.41-17.63 (Vernon 2002 & Supp. 2008).
2. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 251
(1993).
3. TEX. Bus. & COM. CODE ANN. § 17.44(a) (Vernon 2002).
4. Reiter v. Sonotone, 442 U.S. 330, 343 (1979) (quoting R. BORK, THE ANTITRUST
PARADOX (1978)).
5. Roy B. Taylor Sales, Inc. v. Holymatic Corp., 28 F.3d 1379, 1382 (5th Cir. 1994). 6. TEx. Bus. & COM. CODE ANN. § 17.46(c)(1) (Vernon 2002 & Supp. 2008). 7. Maria Pleyte, Online Undercover Marketing: A Reminder of the FTC's Unique
Po-sition to Combat Deceptive Practices, 6 U.C. DAvIs Bus. L.J. 14 (2006) ("Many states have
enacted consumer protection laws known as Little FTC Acts. ").
II. ANTITRUST STATUTES
"The Sherman Act, enacted in 1890, the Clayton Act, enacted in 1914, and the Robinson-Patman Act, which amended the Clayton Act in 1936, all serve the purpose of protecting competition."9 Likewise, the purpose
of the Texas Free Enterprise and Antitrust Act ("TFEAA")a0
"is to maintain and promote economic competition in trade and commerce oc-curring wholly or partly within the State of Texas and to provide the ben-efits of that competition to consumers in the state."1
Noteworthy antitrust decisions rendered during the Survey period address standards of proof and pleading, concerted refusals to deal, and antitrust injury.
The principal federal antitrust statutes are sections 1 and 2 of the Sher-man Act.1 2 Section 1 condemns contracts, combinations, and conspira-cies in unreasonable restraint of trade.13
Section 2 condemns monopolization and attempts and conspiracies to monopolize a relevant economic market.14
Although certain offenses like price-fixing among competitors are deemed unlawful per se and no proof of actual market impact is required to demonstrate a violation, most antitrust claims re-quire proof of an actual or threatened injury to competition, which usu-ally requires proof that the defendant possesses market power in a relevant economic market.15 The analytical approach used to make this
determination is called the "rule of reason. '1 6
In Leegin, a divided Supreme Court overturned ninety-six years of pre-cedent to hold that minimum resale price maintenance is no longer per se illegal under section 1; instead it is to be judged under the rule of rea-son.17 In so holding, the five-to-four majority overruled Dr. Miles Medi-cal Co. v. John D. Park & Sons Co.,18 which held that it is always unlawful for a manufacturer and its distributor or retailer to agree on the minimum price that the latter will charge on resale of the manufacturer's goods.19
At the time of trial, Leegin manufactured the Brighton line of women's accessories, which were sold primarily in small, independently-owned boutiques.2 0 Leegin sold Brighton products to the plaintiff, a women's
9. Brooke Group Ltd. V. Brown & Williamson Tobacco Corp., 509 U.S. 209, 251 (1993) (citations omitted).
10. TEX. Bus. & COM. CODE ANN. §§ 15.01-.52 (Vernon 2002 & Supp. 2008).
11. Id. § 15.04.
12. 15 U.S.C. §§ 1-2 (2006). The parallel provisions exist under Texas law. TEX. Bus.
& COM. CODE ANN. § 15.05 (a)-(b) (Vernon 2002).
13. 15 U.S.C. § 1. Notwithstanding the literal language of the statute, the Supreme
Court recognized as early as 1911 that section 1 only condemns unreasonable restraints.
Am. Tobacco Co. v. United States, 221 U.S. 106, 175-84 (1911); see also Bus. Elecs. Corp. v.
Sharp Elecs. Corp., 485 U.S. 717, 723 (1988); Nw. Wholesale Stationers, Inc. v. Pac. Statio-nary & Printing Co., 472 U.S. 284, 289 (1985).
14. 15 U.S.C. § 2. See United States v. Grinnell Corp., 384 U.S. 563, 571 (1966). 15. See Cont'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49-50 (1977). 16. Leegin Creative Leather Prods., Inc. v. PSKS, 127 S. Ct. 2705, 2712 (2007). 17. Id.
18. 220 U.S. 373 (1911). 19. Id. at 384-85.
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clothing and accessories specialty store.21 In 1997, Leegin instituted its "Brighton Retail Pricing and Promotion Policy," which provided that Leegin would only do business with retailers who followed its suggested retail prices.22 Leegin also introduced a marketing initiative that re-warded retailers for certain promotional activities.2 3 This initiative re-quired retailers to pledge to follow the "Brighton Suggested Pricing Policy at all times."'2 4
In contravention of Leegin's policies, the plaintiff placed its entire line
of Brighton products on sale.25 When the plaintiff refused to stop
dis-counting, Leegin suspended all shipments of Brighton products to the plaintiff, resulting in a substantial decrease in the plaintiff's sales.2 6 The plaintiff sued, claiming that Leegin had violated section 1 of the Sherman Act by entering into illegal agreements with retailers to fix the prices of Brighton products and by terminating the plaintiff for not complying with those agreements.27 Leegin had planned to introduce expert testimony at
trial describing the procompetitive effects of its pricing policy.28 Relying
on the Dr. Miles per se rule against minimum resale price maintenance, the district court excluded the proffered testimony as irrelevant to the jury's inquiry.29 The jury found that Leegin and its retailers agreed to fix prices, causing the plaintiff to suffer antitrust injury and lost profits of
$1.2 million.30
In an unpublished opinion, the Fifth Circuit affirmed the trial court's judgment, holding that Dr. Miles required application of the per se rule notwithstanding Leegin's claimed lack of competitive harm.3 1 The Su-preme Court granted certiorari.32
Writing for the majority, Justice Kennedy asserted that Dr. Miles was based on the common law rule that restraints upon alienation were ordi-narily invalid and on the argument that resale price agreements are anal-ogous to an illegal agreement between competing distributors because the resale agreements benefit the distributors, not the manufacturer 33 The majority further argued that these rationales had been abandoned by more recent Supreme Court jurisprudence.34 Since Dr. Miles, the Su-preme Court has rejected attempts to base antitrust law on "formalistic" legal doctrines, such as the common law rule against restraints upon
21. Id. at 2711. 22. Id.
23. Id.
24. Id. at 2710-11. 25. Id. at 2711. 26. Id.
27. Id. at 2712.
28. Id. 29. Id.
30. Id. at 2711-12. 31. Id. at 2712.
32. Id.
33. Id. at 2713-14. 34. Id. at 2714.
alienation, in favor of demonstrable economic effects.35 Quoting Conti-nental TV., the majority "reaffirm[ed] that 'the state of the common law 400 or even 100 years ago is irrelevant to the issue before us: the effect of the antitrust laws upon vertical distributional restraints in the American economy today."' 36 The majority similarly concluded that since Dr. Miles, the Supreme Court has rejected analyzing vertical restraints by comparing them to horizontal restraints.37
Finding that the foundations of the Dr. Miles rule have since been re-jected, the majority determined that it should reexamine whether a per se prohibition against minimum resale price maintenance is appropriate.38 In doing so, the majority cited empirical studies and economics literature skeptical of resale price maintenance claims, suggesting procompetitive reasons for a manufacturer's imposition of mandatory resale prices.39 Conceding that resale price maintenance can have anticompetitive ef-fects, the majority asserted that the elimination of intrabrand price com-petition also may encourage
retailers to invest in tangible or intangible services or promotional efforts that aid the manufacturer's position as against rival manufac-turers. Resale price maintenance also has the potential to give con-sumers more options so that they can choose among price, low-service brands; high-price, high-low-service brands; and brands that fall in between.40
The majority concluded that resale price maintenance can increase in-terbrand competition by "facilitating market entry for new firms and brands" and by encouraging retailer services that would not otherwise be provided.41
These procompetitive justifications made application of the per se rule inappropriate because a per se prohibition would "proscribe a significant amount of procompetitive conduct. '42
In so holding, the ma-jority rejected stare decisis as a reason to maintain the per se rule in large part because the Sherman Act is expected to "evolve to meet the dynam-ics of present economic conditions" and because it is not uncommon for the Supreme Court to reverse precedent where, as here, subsequent cases
have undermined an opinion's doctrinal basis.43
The majority provided limited guidance for the application of its newly-announced "rule of reason" test, suggesting that lower courts should con-sider the number of manufacturers in a given industry that make use of the practice to determine the likelihood that the practice is being used to facilitate a manufacturer cartel.44 Also relevant is the source of the
re-35. Id. 36. Id. at 2714.
37. Id. at 2713-14.
38. Id. at 2714.
39. Id. at 2714-15.
40. Id. at 2715.
41. Id. at 2716. 42. Id. at 2718.
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straint, because if retailers are the impetus, the restraint might be facili-tating a retailer cartel or supporting a dominant, inefficient retailer.45 The majority also suggested that the market power of the manufacturer and retailer involved should be considered because a dominant player could abuse resale price maintenance for anticompetitive purposes.46
Finally, while acknowledging that "reliance on a judicial opinion is a significant reason to adhere to it, especially in cases involving property and contract rights,"'4 7 the majority concluded that "[t]he reliance
inter-ests ... cannot justify an inefficient rule."'48
Justice Breyer, joined by Justices Stevens, Souter, and Ginsburg, dis-sented.49 For the dissent, the doctrine of stare decisis mandated contin-ued adherence to Dr. Miles.50 Justice Breyer argued that no changed circumstances justified departure from the nearly century-old per se pro-hibition against minimum resale price maintenance, particularly given that in 1975 Congress repealed the McGuire and Miller-Tydings Acts which had made certain acts of resale price maintenance lawful.51 The dissent concluded that in doing so, Congress had consciously extended the Dr. Miles rule of per se illegality.52 Indeed, the Congress considered and rejected "virtually every argument presented now to this Court [against the Dr. Miles rule] as well as others not here presented. '53
Surveying the anti-resale-price maintenance economic literature, Jus-tice Breyer found it variously flawed and criticized, and noted that "many other economists take a different view. Regardless, taken together these studies at most may offer some mild support for the majority's position. But they cannot constitute a major change in circumstances" warranting departure from the rule of per se illegality.54 The dissent reached a simi-lar conclusion with respect to changes in the United States economy that might justify abandonment of the per se rule, concluding: "In sum, there is no relevant change.55 And without some change, there is no ground for abandoning a well-established antitrust rule."56
Justice Breyer then examined the list of factors the Supreme Court should consider before overturning its own precedent.57 The dissent de-termined that the following factors preponderated against overruling Dr. Miles: the case was statutory, not constitutional; Dr. Miles is almost 100 years old and has been relied upon by the Supreme Court in the interim;
45. Id. 46. Id. at 2720.
47. Id. at 2724 (quoting State Oil Co. v. Kahn, 522 U.S. 3, 20 (1997)). 48. Id.
49. Id. at 2725. 50. Id. at 2725-26. 51. Id. at 2731. 52. Id.
53. Id. (citations omitted). 54. Id. at 2732.
55. Id. at 2734. 56. Id. 57. Id.
the per se rule has not created an unworkable legal regime; Dr. Miles has not unsettled the law; the case involves property and contract rights; and the Dr. Miles rule has become "embedded in our national culture.15 8
In conclusion, the dissent argued that "a court that rests its decision upon economists' views of the economic merits should also take account of legal scholars' views about common-law overruling. '59
Noting that the relevant jurisprudence weighs strongly in favor of stare decisis in these circumstances, Justice Breyer observed that "the only safe predictions to make about today's decision are that it likely will raise the price of goods at retail and that it will create considerable legal turbulence as lower courts seek to develop workable principles. '60
In Bell Atlantic Corp. v. Twombly,61
the United States Supreme Court held that a complaint alleging that competitors engaged in parallel con-duct but lacking a description of facts "suggesting agreement, as distinct from identical, independent action" cannot survive a Rule 12(b)(6) mo-tion to dismiss for failure to state a claim.62
The plaintiffs, on behalf of themselves and a putative class of all "sub-scribers of local telephone and/or high speed internet services," alleged a conspiracy in restraint of trade that resulted in inflated charges for local telephone and high-speed internet service.63 The defendants were the
former "Baby Bells," or Incumbent Local Exchange Carriers ("ILECs"), originally created as regional monopolies by the divestiture of AT&T.64
More than a decade after the divestiture, Congress enacted the Telecom-munications Act of 1996, which withdrew approval of the ILECs' monop-olies and imposed duties upon the ILECs to facilitate market entry by others,65 including the obligation to share the ILECs' networks with com-petitive local exchange carriers ("CLECs").66
The ILECs successfully lit-igated the scope of their sharing obligation, which resulted in a narrower of the range of network elements that must be shared with the CLECs.67
In their complaint, the plaintiffs alleged that the ILECs engaged in par-allel conduct in their respective service areas to inhibit the growth of up-start CLECs, including making unfair agreements for access to the ILEC networks and providing inferior connections to those networks.68
The plaintiffs further alleged that the ILECs had a common motivation to suppress competition from the CLECs, which led the ILECs to form a conspiracy.6 9
The plaintiffs also alleged that the ILECs agreed not to
58. Id. at 2734-36. 59. Id. at 2737. 60. Id.
61. 127 S. Ct. 1955 (2007).
62. Id. at 1961. 63. Id. at 1962. 64. Id. at 1961. 65. Id. 66. Id.
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compete with each other, which could be inferred from the fact that the ILECs had failed to pursue business opportunities in each other's markets.7 0
The district court granted the ILECs' motion to dismiss for failure to state a claim.71 The court held that circumstantial evidence of consciously parallel behavior was insufficient to state a claim under section 1 of the Sherman Act absent the allegation of facts tending to show that the de-fendants' behavior could not be explained as independent, self-interested conduct.72 The Second Circuit reversed, holding that an antitrust plaintiff asserting a section 1 claim based upon parallel conduct need not plead "plus factors," but need only plead facts demonstrating that a conspiracy is plausible.73
The Supreme Court reversed in a seven-to-two decision.74 Writing for the majority, Justice Souter first restated the standard for proving an anti-trust conspiracy.7 5 Parallel behavior of competitors, even when done consciously of each other's actions, is admissible circumstantial evidence of an agreement but does not itself conclusively establish such an agree-ment.7 6 Parallel conduct is consistent with both conspiracy and unilat-eral, competitive business strategy.77 In order to survive summary judgment, a plaintiff must offer evidence that tends to rule out indepen-dent action by the defendants.7 8 Also, Parallel conduct standing alone does not entitle a plaintiff to a directed verdict.79
In analyzing what is required at the pleading stage, the majority ac-knowledged that Federal Rule of Civil Procedure 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is enti-tled to relief."80 A plaintiff need not include detailed factual allegations but must do more than recite the elements of a cause of action, and the allegations in the complaint "must be enough to raise a right to relief above the speculative level."' 81 The majority then disavowed the Su-preme Court's earlier statement in Conley v. Gibson,82 that a complaint
should not be dismissed for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."'83 Although lower courts had relied upon the "no set of facts" language to permit a claim to survive Rule 12(b)(6) dismissal unless its factual impossibility was shown from
70. Id. at 1962. 71. Id. at 1963.
72. Id.
73. Id. 74. Id. at 1960. 75. Id. at 1964. 76. Id.
77. Id.
78. Id.
79. Id.
80. Id.
81. Id. at 1964-65.
82. 355 U.S. 41 (1957).
83. Twombly, 127 S. Ct. at 1968.
Antitrust and Consumer Protection
the face of the pleadings, the majority concluded that "[t]he phrase is best forgotten."84
The majority offered two reasons for rejecting the dissent's argument that disposing of implausible claims should be accomplished after the pleading stage.85
First, discovery is expensive and time-consuming and second, courts have had limited success in checking discovery abuse.86
The expense of discovery means that defendants are likely to settle even meritless claims before the summary judgment or trial stages.8 7
Applying its new standard to section 1 claims, the Supreme Court held that "stating such a claim requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made," which "calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement. '88
The keyword in the standard is "sug-gest."89 The majority distinguished between allegations merely consistent with an agreement, which are insufficient to survive a motion to dismiss, and allegations suggesting an agreement, which will survive such a mo-tion.90 Similarly, showing the possibility of entitlement to relief is not enough and a plaintiff must plead facts showing that entitlement to relief is plausible.9 1 The majority then concluded that because parallel conduct standing alone does not establish a conspiracy, an allegation of parallel conduct accompanied by a bare allegation of conspiracy is insufficient to withstand a motion to dismiss.92
Turning to the plaintiffs' complaint, the majority found that no actual agreement between the ILECs was alleged, and that nothing in the com-plaint "invests either the action or inaction alleged with a plausible sug-gestion of conspiracy" given the independent reasons that each ILEC would have to resist competition from the CLECs, the historical genesis of the ILECs as sanctioned monopolies, and the difficulties the CLECs were having competing with the ILECs.93
"Because the plaintiffs [had] not nudged their claims across the line from conceivable to plausible," the Supreme Court held that dismissal was appropriate.94
Dissenting, Justice Stevens observed that this case did not involve the question of whether parallel anticompetitive conduct of potential com-petitors that has anticompetitive effects, standing alone, will support a section 1 claim.95
"The answer to that question has been settled for more
84. Id. at 1964-65, 1968-69.
85. Id. at 1966-67. 86. Id. at 1967. 87. Id. 88. Id. at 1965. 89. Id. 90. Id. at 1966. 91. Id.
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than 50 years."' 96 Rather, the issue before the Supreme Court was the requisite degree of specificity required for pleading an agreement not to compete.9 7 Noting that Federal Rule of Civil Procedure 8 requires only that a complaint contain "a short and plain statement of the claim show-ing that the pleader is entitled to relief," Justice Stevens emphasized that "[u]nder the relaxed pleading standards of the Federal Rules, the idea was not to keep litigants out of court, but rather to keep them in."
98
Proof of this is found in Form 9, appended to the Federal Rules, which alleges negligence in the barest of terms. As Justice Stevens noted, the Supreme Court has previously endorsed Form 9 "as an example of the simplicity and brevity of statement which the rules contemplate."9 9
With respect to the majority's dismissal of Conley's "no set of facts" language as having "puzzle[ed] the [legal] profession for 50 years," Justice Stevens went on to cite a dozen opinions of the Supreme Court and four separate writings, where "the language [was not] 'questioned,' 'criticized,' or explained away;" as well as decisions of the courts of twenty-six states that have utilized the Conley formulation.10 0 Emphasizing that "[t]his case is a poor vehicle for the Court's new pleading rule," because in anti-trust cases, "the proof is largely in the hands of the alleged conspira-tors,"101 Justice Stevens expressed the following concern:
I fear that the unfortunate result of the majority's new pleading rule will be to invite lawyers' debates over economic theory to conclu-sively resolve antitrust suits in the absence of any evidence. It is no surprise that the antitrust defense bar-among whom "lament" as to inadequate judicial supervision of discovery is most "common,"-should lobby for this state of affairs. But "we must recall that their primary responsibility is to win cases for their clients, not to improve law administration for the public."10 2
In Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co.1 03 the Supreme Court was called upon to decide whether a plaintiff alleging predatory bidding must meet the same test applied to claims of predatory pricing.10 4 Plaintiff Ross-Simmons had been a hardwood lumber sawmill in the Pacific Northwest since the 1960s.10 5 Defendant Weyerhaeuser en-tered the market in 1980 by acquiring an existing lumber company and owned six hardwood sawmills.10 6 Both companies acquired red alder
96. Id. (Stevens, J., dissenting) (citing Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537 (1954)).
97. Twombly, 127 S. Ct. at 1974-75. 98. Id. at 1975-76.
99. Id. at 1977 (quoting Swierkiewicz v. Sorema N. A., 534 U.S. 506, 513 n.4 (2002)). 100. Id. at 1978.
101. Id. at 1983 (quoting Hosp. Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 746 (1976) (quoting Poller v. Columbia Broad. Sys., 368 U.S. 464, 473 (1962)).
102. Id. at 1988 (quoting CLARK, SPECIAL PLEADING IN THE "BIG CASE?," PROCE-DURE-THE HANDMAID OF JUSTICE 52 (C. Wright & H. Reasoner eds. 1965).
103. 127 S. Ct. 1069 (2007). 104. Id. at 1072.
105. Id. 106. Id.
sawlogs on the open bidding market.10 7
Between 1998 and 2001, prices for sawlogs rose while prices for the finished lumber fell.'0 8 Ross-Sim-mons suffered heavy losses and eventually shut its mill.'0 9 Ross-Simmons then sued Weyerhaeuser for monopolization and attempted monopoliza-tion, alleging that Weyerhaeuser had overpaid for sawlogs in order to ar-tificially raise prices such that Ross-Simmons could not make a profit.' 0
Weyerhaeuser moved for summary judgment before trial and for judg-ment as a matter of law at the close of the evidence.11 The district court denied both motions and instructed the jury that Ross-Simmons could succeed on its predatory bidding case if the jury found that Weyerhaeuser
"purchased more logs than it needed, or paid a higher price for logs than necessary in order to prevent [Ross-Simmons] from obtaining the logs they needed at a fair price.'' 112
The jury found for Ross-Simmons on the monopolization claim and awarded $26 million in damages.113
On appeal to the Ninth Circuit, Weyerhaeuser argued that proof of illegal predatory bidding should mirror that required by the Supreme
Court in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.1'4 for
predatory pricing-pricing below cost in order to drive rivals from the market.1 5 In Brooke Group, the Supreme Court held that recovery on a predatory pricing claim requires proof that prices are below an "appro-priate measure" of the competitor's costs and that the competitor had a "dangerous probability" of recouping the losses caused by the below-cost pricing.' 16 The Ninth Circuit disagreed with Weyerhaeuser and affirmed
the jury's verdict. 17
The Supreme Court granted certiorari to consider the proper test for analyzing a claim of monopolization by predatory bidding.1 18 Writing for a unanimous Supreme Court, Justice Thomas relied heavily on scholarly articles, describing predatory bidding as a scheme in which a buyer ac-quires monopsony power by bidding up the market price of a necessary product so high that rival buyers cannot compete.119
Once the buyer has caused its competitors to leave the market, it seeks to reduce the price for the products by restricting its purchases below the competitive level.120 The resulting cost savings then offset any losses incurred during the bid-ding-up phase.'2 1
The Court noted that when the predatory firm's
com-107. Id.
108. Id. at 1073. 109. Id.
110. Id. at 1072-73.
111. Id.
112. Id. 113. Id.
114. 509 U.S. 209 (1993).
115. Weyerhaueuser Co., 127 S. Ct. at 1073. 116. Brooke Group, 509
U.S.
at 222-23. 117. Weyerhaeuser Co., 127 S. Ct. at 1073-74. 118. Id. at 1074.119. Id. at 1074-75. 120. Id.
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petitors participate in both the input and output markets, the would-be predator might also recoup its losses by raising the output prices to mo-nopolistic levels.122
The Supreme Court held that predatory pricing and predatory bidding are economically similar in that both involve "the deliberate use of unilat-eral pricing measures for anticompetitive purposes.' 12 3 As the Court explained:
Predatory pricing requires a firm to suffer certain losses in the short term on the chance of reaping supracompetitive profits in the future. A rational business will rarely make this sacrifice. The same reason-ing applies to predatory biddreason-ing. A predatory-biddreason-ing scheme re-quires a buyer of inputs to suffer losses today on the chance that it will reap supracompetitive profits in the future. For this reason "[s]uccessful monopsony predation is probably as unlikely as suc-cessful monopoly predation."'1 24
The Supreme Court also recognized that firms may have legitimate, even procompetitive, reasons for setting low prices for their outputs or paying high prices for needed inputs, and that failed predatory pricing schemes and failed predatory bidding schemes both may benefit consumers.125
These similarities convinced the Court that the two-pronged Brooke Group test was appropriately applied to predatory bidding.126 A plaintiff alleging predatory bidding therefore must prove that the alleged preda-tory bidding led to below-cost pricing of the bidder's outputs because the cost of the outputs exceeded the revenues generated in selling those out-puts.127 The plaintiff also must "prove that the [bidder] has a dangerous probability of recouping the losses incurred in bidding up input prices through the exercise of monopsony power."'1 28 Ross-Simmons conceded that it had not satisfied the Brooke Group test.'29 Its predatory bidding theory thus could not support the jury's verdict.'30
In Credit Suisse Securities, LLC v. Billing,'3a a putative class of securi-ties investors sued the underwriting firms that marketed and distributed the securities, alleging that the firms had violated the antitrust laws by agreeing with each other to refuse to sell buyers shares of a popular new issue unless the buyers agreed to additional terms.1 32 The Supreme Court, in a 7-1 decision (Justice Stevens concurred in the judgment,
Jus-122. Id. at 1076. 123. Id.
124. Id. at 1077 (quoting R. BLAIR & J. HARRISON, MONOPSONY 66 (1993)).
125. Id. (citing Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 224 (1993)).
126. Id. at 1078. 127. Id. 128. Id. 129. Id. 130. Id.
131. 127 S. Ct. 2383 (2007). 132. Id. at 2387.
tice Kennedy took no part in the decision) held that the securities laws implicitly precluded the antitrust claims.133
In the typical initial public offering ("IPO") of a company's shares, se-curities underwriters form a syndicate to market the shares.3 4 The syndi-cate conducts an investigation into suitable initial share prices and quantities and makes a recommendation to the issuer.135 The investiga-tion typically involves meetings between potential investors and the syn-dicate underwriters and representatives of the issuer in which the underwriters present information about the company and the stock and attempt to gauge the strength of the investors' interest in the stock.' 36 The syndicate and the company then agree upon the number of shares to be sold and the price per share.137
The syndicate buys all the newly-is-sued shares from the company at a discount and then resells the shares to the public at the agreed-upon price, netting the difference as
commissions.138
A group of sixty investors filed two antitrust class actions against ten leading investment banks that allegedly formed underwriting syndicates to help execute the IPOs of several hundred technology-related compa-nies.139 The investors alleged that the underwriters had "abused the... practice of combining into underwriting syndicates" by agreeing to im-pose conditions upon potential investors.' 40 Specifically, the underwrit-ers allegedly required the investors to pay charges in addition to the usual underwriting commission in the form of (1) investor promises to place bids in the aftermarket at higher prices; (2) investor promises to purchase other, less attractive securities; and (3) investor payment of excessive "commissions," including agreements to purchase an issuer's shares in follow-up public offerings.141 The investors also alleged that the under-writers' agreement artificially inflated the price of the securities in
question.142
The underwriters moved to dismiss the investors' complaints on the ground that the federal securities laws impliedly preclude application of antitrust law to the alleged conduct.143 The district court granted the mo-tion to dismiss, but the Second Circuit reversed and the Supreme Court granted certiorari.144
Writing for the Court, Justice Breyer first canvassed three prior Su-preme Court decisions addressing the relationship between securities law
133. Id. at 2386-87. 134. Id. at 2388. 135. Id.
136. Id.
137. Id.
138. Id.
139. Id.
140. Id.
141. Id. at 2389. 142. ld.
143. Id.
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and antitrust law: Silver v. New York Stock Exchange,145 Gordon v. New York Stock Exchange, Inc. ,146 and United States v. National Association of Securities Dealers, Inc. ("NASD").147 In Silver, the Supreme Court held that, where possible, courts should reconcile the operation of the securi-ties and antitrust laws where possible, and that the securisecuri-ties laws should be implied to have precluded application of the antitrust laws only when necessary and then only to the extent necessary, to make the Securities Exchange Act work.14 8 The Silver Court found no such necessity and held that the securities laws did not preclude application of the antitrust laws to an alleged boycott of a broker by the New York Stock Ex-change.'4 9 In Gordon, the Supreme Court held that an "implied repeal" of the antitrust laws should be found only when there is a "plain repug-nancy" between the two statutory schemes.150 The Gordon Court found that such a repugnancy precluded application of the antitrust laws to a complaint regarding the commissions charged by stockbrokers.151 In do-ing so, the Supreme Court relied in large part on the direct regulatory power of the Securities and Exchange Commission ("SEC") over under-writer commissions and the SEC's active role in reviewing commission rates.'52 In NASD, the Supreme Court applied a "clear repugnancy" test in holding that the securities laws precluded an antitrust claim alleging that securities broker-dealers had conspired to, among other things, fix prices and terms of sale.153 Again, the NASD Court relied upon the SEC's existing regulatory authority over the challenged practices.154
This review of prior cases led the Supreme Court to conclude that the proper test for determining whether the securities laws preclude applica-tion of the antitrust laws is whether, given the context and the likely con-sequences, the securities laws and the antitrust allegations are "clearly incompatible."'155 Relying on Gordon and NASD, the Court concluded that, in making this determination, the following factors are critical: (1) the existence of securities-related regulatory authority over the activities in question; (2) evidence of the exercise of that authority; (3) a risk that if both schemes were applicable, conflicting guidance, requirements, duties, privileges, or standards of conduct would arise; and (4) whether the chal-lenged practices "lie squarely within an area of financial market activity that the securities law seeks to regulate.' 56
145. 373 U.S. 341 (1963). 146. 422 U.S. 659 (1975). 147. 422 U.S. 694 (1975). 148. 127 S. Ct. at 2389-90. 149. Id.
150. Id. at 2390. 151. Id. 152. Id. 153. Id. at 2391. 154. Id. 155. Id. at 2392. 156. Id.
Applying these principles to the case at hand, the Supreme Court quickly concluded that the first two factors preponderated in favor of pre-clusion.157 The Court found that the SEC has authority to supervise all of the IPO-related activities in question and has continuously exercised that authority. The Court also found that the fourth factor supported preclu-sion because the activities in question were "central to the proper func-tioning of well-regulated capital markets. t 581
Turning to the third factor-the risk of conflict-the Supreme Court read the investors' complaints regarding particular underwriting practices to attack the manner in which the underwriters jointly sought to collect the allegedly excessive commissions.159 The investors contended that these claims could not be repugnant to the securities laws because the SEC has disapproved of the challenged practices.160 The Court rejected this argument, holding instead that the securities and antitrust laws were clearly incompatible in this situation.161 The Court relied on several facts, the first of which was the "fine, complex, detailed line" that cur-rently separates IPO-related underwriter activity "that the SEC permits or encourages ... from activity that the SEC must (and inevitably will) forbid."162 The Court determined that "evidence tending to show unlaw-ful antitrust activity and evidence tending to show lawunlaw-ful securities mar-keting activity may overlap, or prove identical.' 163 Because of this fine line, the Supreme Court expressed concern that nonexpert judges and juries would be unable to separate acceptable behavior on the part of underwriters from unacceptable behavior, given the "nuanced nature" of the required evidentiary evaluations. Given the fact-specific nature of the evaluations, different courts might not evaluate similar fact patterns consistently.16 4
The Court believed that "antitrust courts are likely to make unusually serious mistakes" in attempting to differentiate between lawful and un-lawful activities.165 Such likelihood of mistakes, in the Court's view, means that underwriters would have to forgo permitted activities in order to safely avoid prohibited activities.16 6 The Court acknowledged that this may be a problem "to some degree in respect to other antitrust lawsuits," but concluded that mistakes are "unusually likely" in the IPO arena.
167
The Supreme Court concluded that allowing an antitrust lawsuit in these circumstances "would threaten serious harm to the efficient func-tioning of the securities markets," that there was an unusually small
en-157. Id.
158. Id. at 2393.
159. Id. at 2393-94. 160. Id. at 2394.
161. Id. 162. Id. 163. Id. at 2395. 164. Id.
165. Id. at 2396.
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forcement-related need for antitrust lawsuits, and that permitting antitrust lawsuits might enable a plaintiff to circumvent the procedural requirements that securities plaintiffs must satisfy.'68 In the face of these conflicts, the securities laws were clearly incompatible with the applica-tion of the antitrust laws to the underwriters' complained-of activities.169 Concurring in the judgment, but not the majority's opinion, Justice Ste-vens opined that the complained-of activity did not violate the antitrust laws.170 Justice Stevens went on, however, to disagree with another as-pect of the Court's opinion:
I would not suggest, as the Court did in Twombly, and as it does again today, that either the burdens of antitrust litigation or the risk 'that antitrust courts are likely to make unusually serious mistakes,' should play any role in the analysis of the question of law presented in a case such as this.171
Justice Thomas dissented. He concluded that the savings clauses of the Securities Act and the Securities Exchange Act preserved the plaintiffs' rights and remedies under the antitrust laws.172
The Fifth Circuit considered the standard for concerted refusals to deal in Tunica Web Advertising v. Tunica Casino Operators Association, Inc.,1
73 which involved an Internet advertising company that sued casino
operators. Tunica Web Advertising and its owner, Cherry Graziosi, owned the domain names "tunicamiss.com," "tunicamississippi.com," and "tunica.com" and leased the domains to the Gold Strike casino in Tunica County, Mississippi for several years.174 None of the domains had a web-site.' 75 Instead, they redirected searchers to the casino's home page.176
The Tunica Country Tourism Commission ( "TCTC") sued Graziosi, alleging that she was a cybersquatter who had no right to own "tuni-camiss.com" or "tunicamississippi.com.' 77 As part of the settlement of that suit, Graziosi transferred her rights in "tunicamiss.com" and "tuni-camississippi.com" to the TCTC and the TCTC released their claims to "tunica.com."178
Graziosi then proposed to the TCTC that she lease "tunica.com" col-lectively to all the casinos in Tunica County.1 79 Under the terms of the proposal, in exchange for a monthly payment from each casino, visitors to "tunica.com" would be redirected to the TCTC website, which already
168. Id.
169. Id. at 2396-97. 170. Id. at 2398.
171. Id. (Stevens, J. concurring). 172. Id. at 2399 (Thomas, J. dissenting). 173. 496 F.3d 403 (5th Cir. 2007). 174. Id. at 406-07.
175. Id. at 406. 176. Id. 177. Id. at 407. 178. Id. 179. Id.
contained information about the casinos.180 The proposal was referred to the casinos' trade group, the Tunica Casino Operators Association ("TCOA").18 1 The TCOA met and discussed the proposal and reached a consensus to not utilize the "tunica.com" domain name.182 Graziosi and Tunica Web Advertising contend that at the same meeting, members of the TCOA agreed to individually refuse to deal with Tunica Web Adver-tising on any terms.'83 Shortly after the TCOA meeting, the Gold Strike casino cancelled its lease of "tunica.com.1 84 Gold Strike's marketing di-rector allegedly told Graziosi that the casinos had entered into a "gentle-men's agreement" not to do business with Tunica Web Advertising and that her "hands were officially tied" by the TCOA.1 85 Supposedly, the refusal to deal was intended to lower the value of the "tunica.com" do-main name.186
Tunica Web Advertising then developed its own web site at "tu-nica.com" with the intention of generating revenue through advertising from casinos and commissions from online hotel booking.1 8 7 Tunica Web Advertising approached the casinos with this new business model, but none of the casinos chose to advertise on the site. 88 Graziosi and Tunica Web Advertising alleged that this refusal conformed to the earlier agree-ment to refuse to deal with Tunica Web Advertising, and presented an email from Gold Strike's marketing director to Graziosi stating that the TCOA later met and reaffirmed its agreement.18 9
Graziosi and Tunica Web Advertising sued the casinos, the TCTC, and the TCOA. The TCTC was dismissed by the court on immunity grounds and the TCOA and Gold Strike were dismissed by agreement of the par-ties.1 90 The trial court granted summary judgment for the remaining casi-nos, holding that (1) the casinos' alleged conduct could not constitute a per se violation of section 1 of the Sherman Act; (2) the alleged original agreement not to deal with Tunica Web Advertising was a legal joint re-sponse to a joint proposal; and (3) Tunica Web Advertising did not show that any refusals to deal after the original agreement were the result of concerted action because it did not present detailed evidence of its pro-posals to the casinos.191
On appeal, the Fifth Circuit agreed that the casinos' original agreement to reject Tunica Web Advertising's offer was not actionable because it
180. Id.
181. Id. 182. Id.
183. Id.
184. Id.
185. Id. 186. Id. 187. Id.
188. Id. at 407-08. 189. Id.
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was a joint response to a joint proposal.192 The court disagreed, however, with the argument that there was no evidence of any actionable agree-ment.'93 The statements by Gold Coast's marketing director disclosing a "gentlemen's agreement" between the casinos that none of them would use "tunica.com" or deal with Tunica Web Advertising, and the later email reporting a subsequent agreement were sufficient to raise a fact issue about whether the casinos had engaged in concerted action.194 Such direct evidence of an agreement relieved the plaintiffs of the need to pro-vide circumstantial epro-vidence of an agreement such as details of the re-jected proposals to the casinos.195 The direct evidence also meant that the existence of plausible reasons for independent action did not establish the casinos' right to summary judgment.196
The Fifth Circuit also considered Tunica Web Advertising's argument that the refusal to deal was a per se illegal horizontal boycott.1 97 Al-though the casinos clearly were direct competitors, they pointed to lan-guage from the Supreme Court and Fifth Circuit suggesting that per se illegal boycotts are those intended to harm a competitor of the conspira-tors.198 Relying on this language, the casinos argued that a per se illegal horizontal boycott requires that at least one of the conspirators be a di-rect competitor of the victim.1 99 Acknowledging that "[p]recisely which group boycotts are subject to the per se rule is ... not always clear," the court observed that the Supreme Court has never held that injury to a competitor of the conspirators is an absolute prerequisite to a finding of per se illegality, and concluded that the district court had erred in so hold-ing.200 Relying on Northwest Wholesale Stationers, Inc. v. Pacific Station-ery & Printing Co.,201 the Fifth Circuit held that in determining whether the per se rule should apply to the alleged horizontal boycott, a court should consider "(1) whether the casinos hold a dominant position in the relevant market; (2) whether the casinos control access to an element necessary to enable [Tunica Web Advertising] to compete; and (3) whether there exist plausible arguments concerning pro-competitive ef-fects. '202 The Fifth Circuit remanded the case to allow the district court
to make the first analysis of these issues.203
The Fifth Circuit also considered the antitrust injury component of standing during the Survey period. In Norris v. The Hearst Trust,20 4 for-mer distributors of the Houston Chronicle sued the newspaper's owners,
192. Id. at 410.
193. Id. at 411.
194. Id. at 410-11.
195. Id. at 411. 196. Id. 197. Id. 198. Id. at 412. 199. Id.
200. Id. at 412, 414. 201. 472 U.S. 284 (1985). 202. 496 F.3d at 414-15.
203. Id. at 415.
204. 500 F.3d 454 (5th Cir. 2007).
complaining that they had been wrongfully terminated. The Fifth Circuit held that the former distributors' antitrust claims failed because they lacked antitrust injury and antitrust standing.20 5
The Hearst Trust, the Hearst Corporation, and Hearst Newspapers Partnership, L.P. (collectively, "Hearst") cancelled the plaintiffs' distribu-tion agreements for the Chronicle, the only daily newspaper of general circulation in the greater Houston area.20 6 All but one of the plaintiffs sued in state court, alleging that Hearst had coerced the plaintiffs into producing fraudulent circulation reports and that cancellation of their dis-tribution contracts was in retaliation for the plaintiffs' complaints.20 7 Judgment was entered against the plaintiffs in state court and, joined by an additional distributor, they filed suit in federal court asserting essen-tially the same claims with the addition of federal and state antitrust claims.20 8 The only product described in the distributors' complaint was the Houston Chronicle and the only users of that product were its readers and advertisers.20 9 The distributors did not allege that they were consum-ers of the paper or its advertising services or that they were competitors of Hearst or the paper. Nor did they allege that the cancellation of their distribution agreements had harmed the subscribers or readers.210 They did allege that their termination had been related to Hearst's plan to in-flate circulation figures with the intended result of increasing advertising sales and revenue.211
The district court granted Hearst's Rule 12(b)(6) motion to dismiss, holding that the plaintiffs' re-repleaded state court claims were barred by res judicata and collateral estoppel due to the prior state court judgment and that the antitrust claims were barred for lack of antitrust injury and antitrust standing.212 On appeal, the distributors argued that they had sustained antitrust injury because they were terminated as a result of their refusal to participate in Hearst's illegal scheme to raise advertising prices, itself an antitrust violation.213 The Fifth Circuit rejected this argu-ment, finding that the only persons who would be directly injured by Hearst's scheme to inflate circulation numbers would be those desiring to advertise in the Chronicle and other media that sell advertising.21 4 The court concluded that such persons were the appropriate parties to sue for any violation arising from Hearst's alleged scheme.215
The court further held that the plaintiffs' bare allegations that Hearst had vertically integrated into newspaper distribution and therefore was
205. Id. at 469.
206. Id. at 457.
207. Id.
208. Id. at 457, 460. 209. Id. at 463.
210. Id.
211. Id. at 463-64. 212. Id. at 460. 213. Id. at 463-64, 466.
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the distributors' competitor did not confer antitrust standing in the ab-sence of any allegation that the vertical integration had anything to do with the plaintiffs' termination.216 There was no allegation that the plain-tiffs' termination increased the Chronicle's price or decreased its availa-bility.217 In these circumstances, even had Hearst terminated the distributors in order to take over the Chronicle distribution, Hearst would not have committed an antitrust violation giving rise to antitrust injury to the distributors.2 18
III. DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT
The DTPA was enacted in 1973 "to protect consumers against false, misleading and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection. '2 19 Noteworthy DTPA decisions during the survey period address the sufficiency of the evidence of a DTPA viola-tion, preempviola-tion, and damages.
A. STANDING AND CONSUMER STATUS
In order to bring a DTPA claim, a plaintiff must be a "consumer" as defined in the statute.220 To qualify as a consumer, the plaintiff must be one who "seeks or acquires, by purchase or lease, any goods or services;" further, those goods or services must form the basis of the plaintiff's com-plaint.22 1 Consumer status under the DTPA depends upon a showing
that the plaintiff's relationship to the transaction entitles him to relief.222
When the facts underlying the determination of consumer status are un-disputed, whether a plaintiff qualifies for such status is a question of law.2 2 3
The First District Houston Court of Appeals, in Richardson-Eagle, Inc. v. William M. Mercer, Inc.,224 affirmed the dismissal of a plaintiff's DTPA claims by determining that the plaintiff was not a consumer.225 In this factually convoluted matter, Mercer contracted with the Houston Inde-pendent School District ("HISD") to solicit bids for a benefit plan to be
216. Id. at 468.
217. Id.
218. Id. at 468.
219. TEX. Bus. & COM. CODE ANN. § 17.44(a) (Vernon 2002). 220. See id. § 17.50.
221. Id. § 17.45(4); Melody Home Mfg. Co. v. Barnes, 741 S.W.2d 349, 351-52 (Tex. 1987).
222. Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 650 (Tex. 1996). See also Sanchez v. Liggett & Myers, Inc., 187 F.3d 486, 491 (5th Cir. 1999) (holding that a "DTPA claim requires an underlying consumer transaction; there must be a nexus between the con-sumer, the transaction, and the defendant's conduct") (citing Amstadt, 919 S.W.2d at 650). 223. Vinson & Elkins v. Moran, 946 S.W.2d 381, 406 (Tex. App.-Houston [14th Dist.] 1997, writ dism'd by agr.).
224. 213 S.W.3d 469 (Tex. App.-Houston [1st Dist] 2007, pet. denied). 225. Richardson-Eagle, 213 S.W.3d at 477.
provided by HISD to its employees.2 26 Richardson-Eagle responded to the bid on behalf of two insurance companies, one who offered to provide a disability insurance policy and the other who offered a cancer and hos-pital-indemnity policy.227 HISD rejected the proposals and directed Mer-cer to negotiate directly with the two insurance companies that submitted bids. While one company refused to negotiate, the other did, ultimately leading to a contract.2 28
Richardson-Eagle then filed suit against Mercer asserting a multitude of claims, including tortious interference and violations of the DTPA.229 Mercer moved for summary judgment arguing that Richardson-Eagle was not a consumer and therefore lacked standing to sue under the DTPA.230 The trial court agreed, finding that Richardson-Eagle did not seek goods or services from Mercer, and accordingly granted summary judgment, which was affirmed by the Houston court.231
B. DECEPTIVE PRACTICES
In addition to establishing consumer status, a DTPA plaintiff must show that a "false, misleading, or deceptive act," breach of warranty, or unconscionable action or course of action occurred, and that such con-duct was the producing cause of the plaintiff's damage.232
1. Laundry List Claims
DTPA section 17.46(b) contains, in 27 subparts, a nonexclusive "laun-dry list" of actions that constitute "false, misleading or deceptive acts" under the statute.
Bossier Chrysler-Dodge II, Inc. v. Riley,233 involved allegations of two of these "laundry list" actions-section 17.46(b)(12), which prohibits rep-resenting that an agreement conferred or involved rights, remedies, or obligations that it did not have, and section 17.46(b)(24), which prohibits failure to disclose known information with the intent to induce a con-sumer into a transaction the concon-sumer would not have entered if the in-formation had been disclosed.234 Bossier Chrysler-Dodge sued James Riley for failing to deliver a pickup truck as a trade-in for a used car that Riley allegedly had purchased.2 35 Riley counterclaimed for fraud and DTPA violations arising from a dispute over the financing terms and whether and when Riley could cancel the sales contract.236 The jury
226. Id. at 472.
227. Id. at 472-73.
228. Id. 229. Id. at 472.
230. Id. at 478-79.
231. Id.
232. TEX. Bus. & COM. CODE ANN. § 17.50(a)(1)-(3) (Vernon 2002 & Supp. 2008). 233. 221 S.W.3d 749 (Tex. App.-Waco 2007, pet. denied).
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found that Bossier had committed fraud and violated the DTPA and awarded Riley damages.2 37
Bossier appealed, arguing that there was insufficient evidence of ac-tionable misrepresentations or omissions.238 Riley testified at trial that at
the time he signed the contract for the purchase of the used car, a Bossier representative told him that financing had been approved.239 He also
tes-tified that he was told that he could cancel the contract.240 The Waco Court of Appeals concluded that this evidence of misrepresentation was legally sufficient.241 Likewise, there was legally sufficient evidence that Bossier knew that financing was not approved until after Riley signed the installment contract, that Bossier failed to disclose this information, and that Riley would not have signed the contract if he had known that fi-nancing had not yet been approved.242 Because there was conflicting evi-dence regarding when financing was approved, when Riley signed the various documents, and when Riley cancelled the contract, the court con-cluded that it was required to defer to the jury's resolution of those issues and that the evidence was factually sufficient to support the verdict.243
2. Section 17.50-Breach of Warranty
A DTPA claim may be based on the breach of an express or implied warranty, although the DTPA does not itself create any warranties.2 44 The Fort Worth Court of Appeals considered whether a plaintiff's knowl-edge of defects precludes an implied warranty claim in Haire v. Nathan
Watson Co.245 The Haires' home began having structural problems and investigations revealed excessive swelling of the soil beneath the home without design and construction to accommodate the swelling.246
The Haires sued the subdivision's developer, alleging that it had a duty to prepare the lot so that it could adequately support a home, and that pro-viding such services gave rise to an implied warranty that the Haires' lot would be prepared in a good and workmanlike manner. The Haires also brought a breach of implied warranty claim against the geotechnical engi-neering firm that, in the initial development stages of the subdivision, had been hired to perform soil analysis to serve as a basis for the design of the foundations of the subdivision's homes. The engineering firm success-fully moved for summary judgment on the warranty claim and the Haires appealed.2 47
237. Id. 238. Id.
239. Id. at 753. 240. Id. at 754. 241. Id. at 756. 242. Id.
243. Id. at 756-57.
244. Parkway Co. v. Woodruff, 901 S.W.2d 434, 438 (Tex. 1995). See also TEX. Bus. & COM. CODE ANN. § 17.50(a)(2) (Vernon 2002 & Supp. 2008).
245. 221 S.W.3d 293(Tex. App.-Fort Worth 2007, pet. denied). 246. Id. at 296.
247. Id. at 297.
The Fort Worth Court of Appeals affirmed the trial court's grant of the engineering firm's summary judgment motion.248 The court first ex-plained that "[o]ne of the purposes behind the implied warranty that ser-vices be performed in a good and workmanlike manner is the protection of the helpless consumer who takes what he gets because he does not know enough technically to test or judge what is before him."'249 This protection is unwarranted if the consumer is advised of the need for re-pairs and the consequences of failing to make them.25 0 The summary judgment evidence showed that, the Haires were aware of the potential problems in the subdivision and in the home they were buying through the original homeowner's disclosure, an earlier inspection, and their own pre-purchase inspector's findings, and were on notice of the potential for structural problems without proper maintenance and repairs.25 1 The court concluded that this knowledge barred the Haires' claim for breach of implied warranty.2 52
C. DETERMINING THE MEASURE OF DAMAGES
A prevailing plaintiff in a DTPA action may recover economic dam-ages.253 In cases involving misrepresentation, the plaintiff may recover either "out-of-pocket" or "benefit-of-the-bargain" damages.254 Out-of-pocket damages measure the difference between what the buyer paid and the value of what he received.255 Benefit-of-the-bargain damages mea-sure the difference between the value of the goods or services as repre-sented and the value as received.256 If the trier of fact finds that the defendant acted "knowingly," the plaintiff may also recover damages for mental anguish and treble statutory damages.257
1. Damages for Mental Anguish
The Texarkana Court of Appeals considered the evidence necessary to support an award of mental anguish damages in Medical Protective Co. v. Herrin.258 Herrin, a surgeon, sued his former malpractice carrier for re-fusing to renew his insurance policy.259 At trial, he sought damages for reduced earnings and mental anguish.260 He testified that when he re-ceived the nonrenewal notice he felt "terrible," and that the insurer's statement that there were frequent and severe malpractice claims against
248. Id. at 303.
249. Id. at 302. 250. Id.
251. Id. at 303.
252. Id. at 302-03.
253. TEX. Bus. & CoM. CODE ANN. § 17.50(b)(1) (Vernon 2002 & Supp. 2008).
254. Leyendecker & Assocs. v. Wechter, 683 S.W.2d 369, 373 (Tex. 1984).
255. Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 817 (Tex. 1997).
256. Id.
257. Leyendecker, 683 S.W.2d at 373.
258. 235 S.W.3d 866 (Tex. App.-Texarkana 2007, pet. denied). 259. Id. at 870-71.
